After-School Care or Extended Day Care Programs: FSA Eligibility
How is after-school care covered?
After-school care or extended daycare programs are invaluable for working parents or those who are pursuing an education to balance child care and their efforts to make a living and support their families. Parents who are looking for assistance in covering child care have a choice between the child care tax credit or an employer-sponsored dependent care flexible spending account (DCFSA).
Child Care Tax Credit
First, parents have a choice of opting for the childcare tax credit, which provides a 20-to-35 percent rebate on child care expenses up to $3,000 (or $6,000 with two or more children). According to current IRS regulations, if parents’ adjusted gross income (AGI) is less than $15,000 per year, they will be entitled to the full tax credit (35 percent), while if their AGI is more than $43,000 per year, they will be reimbursed 20 percent.
Dependent Care Flexible Spending Account (DCFSA)
After-school care or extended day care programs are eligible for reimbursement with a DCFSA, as long as these expenses allow caregivers to work, look for work, or go to school full-time. If an employee has a spouse that is a stay-at-home mother or father, the expenses for the child will not qualify (FSA Feds).
The minimum and maximum amounts allowed to be contributed to a DCFSA are set by the employer and the maximum set forth by the IRS is $5,000 for individuals or married couples filing jointly, or $2,500 for a married person filing separately. As opposed to Healthcare FSAs, expenses can only be reimbursed under a DCFSA that fall within a current account balance, which may make it more difficult to cover large claims early in a given year.
Not eligible with an FSA, Limited FSA, HRA or HSA.